Ovum View: BT in pole position for wireless LAN

BT recently announced its plans to operate the first UK public wireless LAN network. It should be congratulated on its decisiveness, says Ovum senior analyst Richard Dineen, especially as first-mover advantage will help it secure access to prime real estate.

At the beginning of 2002, a rumour circulated in the telecoms community that BT Retail had released a tender for a large-scale wireless LAN solution. What was their game?

Speculation was rife: BT sympathisers anticipated a bold stroke to take advantage of one of the most exciting new technologies in telecoms. Sceptics speculated that it was a cynical attempt to bloody the nose of the UK's cellular operators, by hijacking the headlines with "11Mbps wireless data right here, right now" while cellcos faced up to the cost and complexity of 3G.

Whatever the motive, the rumour turned out to be true and BT along with its technical partners in this enterprise, Cisco and Motorola, plans to launch the UK's first public access wireless LAN (WLAN) network in June 2002. (Subject to regulatory approval for commercial exploitation of the UK's licence-exempt ISM spectrum band.)

Beginning with 20 WLAN 'hotspots' at launch, BT is planning 400 sites to be operational by June 2003, increasing the number to as many as 4,000 sites by mid-2005. BT is already in advanced negotiations with key site owners such as hotels, motorway service stations (Welcome Break), railway stations, airports and coffee shops (Costa).

BT is to be congratulated on its decisiveness. In the wireless LAN world speed can be a great weapon. The success of IEEE 802.11b (or Wi-Fi) technology was its fast time to market, which won the battle for mindshare among OEMs and the user community - both consumer and corporate.

The momentum of 802.11b has now all but seen off competing WLAN technologies, such as HomeRF and HiperLAN2, and the continuing Wi-Fi proliferation will be critical in achieving a dominant presence in the public WLAN space.

BT's first-mover strategy will be highly advantageous in securing access to prime real estate - first-tier locations, such as airports, hotels and service stations. These are where the potential demand for WLAN is more clearly identifiable. (For example, it is estimated that up to 70 per cent of business people own and use their laptops when they travel and these can quite easily be WLAN-enabled).

It is very important for WLAN service providers (sometimes called wireless internet service providers, or WISPs) to stake their territorial claims early on. Due to problems with interference in the frequency bands employed by WLAN and other technologies, only a very limited number of WLAN service providers are likely to be able, or permitted, to operate in any given locale.

So, moving quickly to secure prime sites for its hotspots will be a key differentiator in the attractiveness of an operator's WLAN services. This will be absolutely crucial in the short-term until a workable, equitable and universal system of roaming (such as that used by mobile operators) is implemented for WLAN.

One key advantage BT has in terms of site acquisition is its experience of dealing with public and semi-public premises owners for the installation and operation of its public payphones. It is perhaps fitting that as BT scales back its payphone activities, due to the ubiquity of mobile phones, it will be enhancing its public access operations with a new generation of wireless technology.

By moving into the wireless LAN space BT has certainly turned a few heads and its sudden turn of pace augers well for other parts of its business under the leadership of Ben Verwaayen, group chief executive. However, just because it has first mover doesn't mean it will have everything its own way in the burgeoning market for WLAN services. Everyone is eyeing the WLAN opportunity.

Pierre Danon, CEO of BT Retail, has estimated capital expenditure for its WLAN network will be less than £10m ($14.4m) over the coming 12 months. It is an attractively-priced investment which constitutes a very low barrier to entry and we expect the marketplace for public access WLAN to attract a number of different players - not least mobile operators, MVNOs and building owners - keen to exploit its low cost, ease-of-set-up and high bandwidth capabilities.

WLAN is not some quick route to riches. 802.11b technology (and also that of its big brother, 802.11a) was essentially designed for wirelessly networking closed user groups so is not really intended for providing public access services for multiple discrete users. There are inherent problems with authentication and security, and many potential difficulties with interference and other aspects of frequency planning.

Also, the 2.4 GHz ISM band is already quite overcrowded with traffic from microwave ovens and Bluetooth devices among others. Indeed, this is one of the reasons that dedicated spectrum attracts such high prices from mobile network operators.

Consequently, a WLAN service operating in the public ISM bands - particularly at 2.4GHz while 5GHz is a 'cleaner' band - will not be able to guarantee a specific quality of service (QoS). Instead it is likely to be 'best-effort'. BT, however, confidently asserts that 500Kbps will be typically available to the end user.

BT's announcement was reassuring because it is positioning WLAN as part of a wider integrated mobility services portfolio for UK business customers. WLAN has limitations which must be flagged to avoid over-setting expectations. 802.11b/a wireless LAN is essentially a high bandwidth free-for-all with little guaranteed QoS and poor inherent security and mobility management features.

There are workarounds to deal with these issues (RADIUS authentication, mobile VPN security and so forth) but they do not function as seamlessly or effectively as mobile users have come to expect with cellular technologies.

Operators of wireless LAN services need to set realistic user expectations and market their offerings as such. If it is positioned sensibly - the low cost/price per MB and high bandwidth alone should be enough to attract some key heavy data users to public WLAN services.